Legal Profession (Amendment) Bill
Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will take a landmark step in providing CFAs between lawyers and clients in certain cases. This will help level the playing field for Singapore lawyers in international dispute resolution and also increase access to justice. I have three points of clarification.
My first point is about the coverage of the Bill’s CFA framework. This Bill will establish a single framework for CFAs. For a start, it appears that CFAs will be permitted for international and domestic arbitration proceedings, proceedings before the Singapore International Commercial Court, and related Court and mediation proceedings. These are likely to be transnational, high-value commercial disputes.
The Ministry has indicated that it will continue to study whether CFAs can promote access to justice in other categories of proceedings, including domestic proceedings.
But the consideration for cases on the other end of the spectrum – domestic cases involving indigent litigants, will be different. In cases involving indigent litigants, there may be a greater need to be more protective of the interests of the litigant, as compared to those of parties in high-value commercial disputes who will likely be well-advised.
In establishing the overarching framework under the Bill, can the Minister share what steps the Ministry has taken to ensure that the framework is sufficiently flexible to extend to all categories of disputes? The lessons learnt from initial applications of the CFA framework to high-value commercial disputes may have limited application to cases involving indigent litigants. How will the Ministry study the suitability of CFAs for enhancing access to justice for indigent litigants?
My second point is about plans for allowing CFAs to act in international mediation proceedings.
Singapore has taken steps to position itself as a global mediation hub. The passing of the Mediation Act in 2017 provided a framework for international mediation in Singapore. The Ministry has indicated that CFAs will be allowed, as a start, to international and domestic arbitration, certain proceedings in SICC, and related Court and mediation proceedings. Can the Minister clarify whether CFAs will be allowed to act in international mediation proceedings that do not arise from permitted categories of arbitration or litigation?
My third point is about the classification of cases that are transmitted to other forums. It is not unusual for cases to be transmitted for hearing before different forums. For instance, the current Rules of Court contemplate the transfer of proceedings from the General Division of the High Court to the SICC, and vice versa.
Given that CFAs will only apply to certain categories of cases for a start, can the Minister clarify how the CFA framework will take into account cases that are commenced in one forum, then transmitted to another forum? Is there a possibility under the proposed CFA framework that a case may be commenced in a forum where CFAs are permitted then transmitted to another where CFAs are not permitted? Sir, notwithstanding my clarifications, I stand in support of the Bill.
Mr Edwin Tong Chun Fai (The Second Minister for Law): Mr Speaker, Sir, I thank all the Members who have spoken in support of the Bill.
Before I go into addressing the specific queries raised by Members, let me just make three broad points.
The first is, we appreciate that in introducing the CFA Framework, we have moved away from some of the traditional structures that lawyers are used to – maintenance, champerty – Mr Lim spoke about it; Mr Murali Pillai as well. Which is why we have chosen to do this incrementally, cautiously. We set up a framework to deal with prescribed proceedings first, dealing with the scenario where in most, if not all, of those circumstances, the clients involved are likely to be sophisticated clients, understanding the commercial context and appreciating the need for this. And at the same time, putting our lawyers who compete with foreign lawyers for international work, on the same platform, so that they can also, like their foreign counterparts, go in to make a bid for work on the basis of using CFAs.
So, we start with that principle and to take up Mr Murali Pillai's point, as we study, and we have not completed our study – to extend this to other proceedings, we will carefully decide, we will consult widely – and in the same way as Mr Pillai has said we have done leading up to this Bill, we will continue to do so – all stakeholders.
We will decide at that stage whether an extension is appropriate and if so, with what kind of additional criteria as safeguards. As Members would know, even with this framework that we have put in a cautious manner for sophisticated clients, we are already putting in safeguards here. So, that is the first point that I would make about the framework.
The second point is that I have heard several comments about the agreement: should we regulate the agreement, should we put this in pro forma or should we put in some standard terms?
I also heard Mr Raj Joshua Thomas said earlier that we should also have a fee structure that allows lawyers to negotiate and that, in his words, is best "appropriate to the complexion of the case". This, really, is the raison d'etre behind the CFA – to let the parties decide what are the triggering requirements to allow a party to decide when an uplift would be appropriate, depending on the context of the particular case. And it is in this context that the interest of the lawyer and the client can best be aligned – not separated, but best be aligned.
Despite that, we continue to have oversight over the agreement because, just as we have done in Part 8 of the LPA for agreed fees, not CFAs but agreed fees, the Court continues to retain a discretion to have an inquiry into, and oversight of, these agreements. Likewise, in the context of the CFA, that remains the same. So, the Courts will still have oversight of the uplift, and in Mr Murali Pillai's words: "to determinate based on the reasonableness of the case, the context of the circumstances, the relevant weightage of the risks taken, the complexity of the case, the length of the case. All of these are factors which the Court takes into account. Which is why it would not be possible upfront to state, you can only uplift by X, or 2X, or 3X", because it may be appropriate in some cases, it may not be appropriate in other cases. So, that is the second point I will make.
The third point I will make is that throughout Members' speeches, I have heard that because this is a new development in our framework, we should be giving guidance. Certainly, we have committed to doing so upfront. That is the reason why we have consulted extensively, both open as well as closed, and we will continue to do so and work with Law Society to ensure that lawyers and users alike, clients, are familiar with the framework and, as far as we can, provide guidance which does not tie the hands of solicitors as they negotiate these CFAs but, at the same time, give guidance as to what the framework requires of the CFAs.
Sir, with that, let me now address the specific queries raised by Members.
Mr Louis Ng asked if CFAs would be allowed to act in international mediation proceedings that do not arise from permitted categories of arbitration or litigation. My Ministry is currently assessing standalone international and domestic mediation proceedings holistically, as part of a separate ongoing study of the CFAs. The potential benefits that CFAs can offer in the use of mediation have to be viewed against the interplay between international mediation proceedings and domestic mediation and litigation proceedings. So, for instance, at present, there is no clear delineation in existing legislation between mediation proceedings that are "international" and those that are "domestic". If parties to an "international" mediation do not reach a settlement, the dispute may proceed to be heard in the SICC or the High Court. As CFAs will presently not be permitted in the High Court, this may then create an ambiguity for lawyers and litigants, given that proceedings on one stream in the High Court will not be allowed for CFAs and those at the SICC will be allowed for CFAs.
Further, mediation proceedings that are more domestic in nature may involve litigants of a wide range of profiles that need differentiated treatment and protection, for the reasons I mentioned earlier. And so, this requires some further study and consideration.
For these reasons, to answer Mr Louis Ng's point, my Ministry has assessed that it would be prudent to consider standalone international and domestic mediation proceedings holistically, as part of an ongoing study of CFAs.
Second, Mr Louis Ng asked how the CFA framework will take into account cases that are commenced in one forum and transferred to another, and whether it is possible that a case may be commenced in a forum where CFAs are permitted and then transferred to another forum where CFAs are not permitted. The answer to this is as follows.
Where proceedings are transferred between two fora in which CFAs are allowed – for instance, from arbitration to related Court or mediation proceedings – then, obviously, the CFAs will continue in the case of the solicitor and the client. So, CFAs will be allowed in those circumstances.
Generally, otherwise, CFAs are not permitted in cases which are transferred from or to a forum where CFAs are not permitted.
So, in the particular example that Mr Louis Ng highlighted about the High Court and the SICC, for the time being, CFAs will not be permitted for proceedings that are transferred from the High Court to the SICC and vice versa. We will study this further and consider whether we should change this, but as a starting point, under this framework, as long as one of the proceedings, either from which it is transferred or to which it is transferred, does not allow the CFA, then the CFA will not be allowed.
This approach towards CFAs and the transfer of forums will avoid any unintended consequences and risks to litigants arising from CFAs, and we will make clear the position in subsidiary legislation.
Mr Murali Pillai asked about the circumstances of enforcement by the Court, with reference to the proposed section 115D(4) and (7) of the Bill he mentioned. The sections referenced by Mr Murali Pillai are aligned with the current 113(3) and 113(7) of the current LPA, in terms of the Court’s powers to deal with contentious cost agreements.
The CFA is, in essence, a contract. And I made the point earlier that parties should have freedom of contract to negotiate the terms of the CFA – and it should be enforced by the Court like any contract if the requirements in the proposed 115B of this Bill, which sets out the regulatory framework and the requirements of the CFAs in this case, have been complied with; and also, of course, if the CFA is not found to be void or voidable for one of the grounds listed in 115D.
On taxation of solicitor-and-client costs under the CFA, Mr Zhulkarnain Abdul Rahim asked whether the taxation process in Court will still be applicable in respect of solicitor-and-client costs under a CFA. He also asked if disputes regarding the validity of CFAs would fall under the scrutiny of taxation proceedings, or if they should be subject to separate Court or arbitration proceedings.
Generally, Sir, solicitor-and-client costs under a CFA are not subject to a taxation. This is provided under section 115C(5) of the Bill and it is similar to the position for contentious business agreements under the current section 112(4) of the LPA. If there are questions, however, on the validity or the effect of a CFA, parties should bring an application to Court under section 115D(2) of the Bill.
Under section 115D(5) of the Bill, if the Court finds that the CFA either does not satisfy the statutory requirements or is found to be void or voidable, then the costs under the CFA can then be assessed in accordance with the rules applicable to taxation.
Mr Zhulkarnain Abdul Rahim also sought confirmation that lawyers agreeing to CFAs would not be held personally liable for adverse party-and-party costs under a CFA, unless there are circumstances of personal or professional conduct that attracts personal liability for costs. That is correct. Under a CFA, a client will continue to be liable for any cost orders that may be made against the client. This will also be clarified in subsidiary legislation.
On Mr Zhulkarnain Abdul Rahim’s query about the disclosure of CFAs vis-à-vis regulatory obligations, such as SGX announcements or audited financial statements, let me reiterate again a point I made at the start of the reply speech, that CFAs really are an additional fee structure. It is an agreement that allows lawyers and their clients to work out a fee structure. CFAs are not intended to change, nor do they change, any existing statutory or regulatory obligations relating to disclosure, from what is expected if normal fee agreements are entered into by companies. So, in assessing whether you need to make an announcement, the usual criteria will apply, whether it is material in the particular context of the circumstances of that particular announcement. Companies and lawyers will still have to make an assessment and assess the extent to which a CFA will need to be disclosed, in the context of existing guidelines and the regulations governing disclosures.
Mr Murali Pillai asked how concerns relating to CFAs that had been highlighted in the past – I think Mr Murali Pillai cited some past speeches and examples – had been addressed.
First, dealing with potential conflicts of interest, I had again mentioned how, in the context of a proper CFA, in this case at least, the sense is that the interest between a solicitor and his client in the CFA can be aligned. But to Mr Murali Pillai's point about a potential conflict arising because of a direct financial interest in the outcome of the litigation, Mr Murali Pillai also asked whether the lawyer may advise on a settlement instead of litigation in order to settle the matter earlier and receive payment. This is notwithstanding that the client will receive a lower amount than what he may reasonably expect if the matter proceeds to litigation.
Mr Raj Joshua Thomas also highlighted a similar scenario. He used the phrase "under-settling". If parties have an agreement and you choose to decide that there will be a payment based on a settlement, then, obviously, if you define the terms of the settlement not below a certain amount, or at least containing these terms, that will protect the client's interest, to ensure that there is no under-settling in this case; not just any settlement, but a settlement that comports with the client's interest in the outcome.
Under a CFA, the standard expected of a lawyer in advising how a case should be conducted or proceeded on remains the same as that of a normal fee agreement. So, what I said earlier in my opening speech about the relevance of the legal professional (PCR) rules, they continue to apply.
Amongst others, Rule 17 of the PCR requires lawyers to explain a proposal of settlement clearly and properly to the client; or any other offer or position taken by another party, which affects the client. At the same time, the lawyer must also evaluate, together with the client, whether any consequence of a matter justifies the expense or the risk to be undertaken. So, if you choose to proceed with the case, there must be an assessment by the lawyer that this would be in the best interest of the client, bearing in mind, obviously, that, in litigation, there are various vicissitudes that you cannot control – points which Mr Raj Joshua Thomas and several other Members highlighted.
If there is a reasonable prospect of the client recovering a higher sum of money in litigation, as compared to settling the matter, such that pursuing litigation would justify the expense of doing so, the lawyer would be obliged to advise his client of the same. These are principles which many of the lawyers who have spoken would be familiar with.
Second, the prospect of increased frivolous litigation and raised litigation costs from CFAs – several Members have touched upon this. We expect that the introduction of CFAs would, on its own, per se, be unlikely to lead to an increase in frivolous litigation. In CFAs, the remuneration of lawyers depends on the successful outcome of the cases. Generally, lawyers are also rational economic actors and they would likely have little commercial reason to support frivolous or weak litigation. The risk of little or no likelihood of monetary return for their efforts would not be commercially justifiable.
Further, as the lawyers may have to fund the litigation until its conclusion, or at least a portion of it, there is likely to be less tendency to pursue all possible avenues at any cost and a greater tendency to be more cost-conscious on the contrary and cost-effective.
At the same time, to assuage Members, the experiences of other jurisdictions also lend support to this. Members might recall that I said earlier that we took a cautious approach. We studied the approach in other jurisdictions and learned from their experiences. For instance, in England and Wales, data suggests that CFAs have not caused an increase in unmeritorious cases. A study on the impact of CFAs in clinical negligence cases over a period of 10 years showed that there has been an increase in cases. But, over a period of 10 years from 2006 to 2017, even in Singapore, we saw an increase in cases. So, it is not because of the CFAs. But what is important is that the proportion of successful claims in this period did not change. In fact, there were more successful claims funded by CFAs.
This underscores the role of the CFAs in enabling the pursuit of meritorious claims. Studies in Australia have also showed that there had not been a significant uptick in unmeritorious suits since the introduction in their jurisdiction of the CFAs. And we believe that Singapore’s experience is not likely to be different. As mentioned in my earlier speech, we will also be implementing rules and safeguards to minimise the abuse of CFAs.
On whether litigation costs will be raised, let me reiterate that existing professional obligations continue to apply and this includes the rules against overcharging. Even if the CFA provides for the payment of an agreed fees, the PCR prohibits overcharging – a point I made earlier – even in a context of today's rules on agreed fee without the uplift.
If the lawyer cannot in good faith charge the fee, taking into account factors, such as the nature of the work done or legal work concerned and the time necessary to undertake the legal work – points which Mr Murali Pillai made – then, these are factors which will be taken into account by the Court when assessing the veracity of the agreed fee.
We believe that legal costs will continue to be moderated and also adjusted by the market itself. If a client finds that a lawyer’s fees are too high, they are free to engage another lawyer who may offer a different range of fees and different uplift formula. Lawyers are also free to adjust their fee arrangements to better place themselves in competition. And Mr Raj Joshua Thomas had himself alluded to this, in urging for lawyers to be allowed to negotiate terms appropriate to the complexion of the particular case concerned.
Mr Murali Pillai asked what would constitute a fair amount for lawyers to charge as an uplift, so that this will not be viewed as a case of overcharging. I think I covered this in my initial remarks. And I think what we want to do is to say that we do not proscribe how parties may choose to structure the fee arrangement, their CFAs, but at the same time, have oversight by reasons set out in the framework, with requirements that they must fulfil, including the "cooling off" period, including the fact that it must be in writing, and also ensuring that parties do not agree a fee that is based on a proportion of the returns from damages or otherwise, in the case itself, which would then has no co-relation to the effort by lawyers.
But save for that, I think as Mr Pillai says, look at the reasonableness in the context of each case. I would say that the mere fact that there is an uplift is not a reason for setting aside the agreement. That is the whole raison d'etre behind the CFA.
I would add a further point that when you have limits on uplift fees in other jurisdictions, they are typically legislated because the fee arrangement in those jurisdictions extend to access to justice type of litigants. They help access to justice indigent litigants to access the courts. And in those cases, you will more likely find a cap on the amount to which you can uplift.
In this case, at least at the start of our framework, we do not apply the framework to those types of cases and those types of litigants. And so, in our case here, we do not need to put a limit on the fee arrangements and the uplift amounts. But as I mentioned earlier, if we extend our framework into other types of cases, this will be a fresh consideration that we will review at the appropriate time.
Mr Zhulkarnain asked about other protection mechanisms for litigants and what safeguards are available for a litigant who had entered into a CFA with a lawyer and thereafter changes lawyers; or whose lawyer decides to withdraw from the case.
My first response really is to ensure that, as you prepare the CFA, structure the terms which will cater for these eventualities. Sometimes, parties change lawyers; sometimes, there might be changes in the way in which the case proceeds. It is best to ensure that, as far as possible, in terms of an agreement, you cater for these scenarios upfront. So, lawyers and their clients should discuss and provide for how and when the CFA may be terminated, and if it is terminated before the conclusion of the case, how would the remuneration structure and what triggering conditions will apply in those cases. And this, I would say, is no different from current traditional fee agreement that is based on either time cost or conclusion of some milestones and so on. So, parties should deal with this as a matter of agreement.
Where a client changes lawyers after a CFA is entered into with the first lawyer, section 115F of the Bill contemplates this scenario and provides for the consequences of such change.
Either party can apply to the Court and the Court will have the same power to enforce or set aside the agreement as if the change had not occurred, having regard to the relevant terms of the CFA.
With regard to fees payable to the first lawyer, the Court may order the amount due in respect of anything done by the lawyer under the CFA to be assessed. So, there could be a scenario where, before the conclusion of the case, a lawyer is discharged but a substantial amount of work is done. The Court can then make an assessment as to what amount will be appropriate under the assessment, to be paid under the CFA for this lawyer.
The principles are largely similar to existing principles relating to contentious business agreements, as set out in section 115 of the Legal Profession Act.
Where a lawyer withdraws from representing a client under a CFA, existing rules under the PCR will also continue to apply. This includes obligations on the lawyer to take reasonable care to avoid foreseeable harm to the client, such as giving reasonable notice and cooperating with the client's new lawyers. None of these will change with the CFA.
Mr Thomas asked about the importance of guidelines and possibly training for lawyers. I think I had covered that. We will do so and we will ensure that there is sufficient guidance for the market once this is in place.
We will take into account the topics highlighted by Mr Thomas. Some of them will be addressed in subsidiary legislation. Others we can put up guidance together with Law Society, to ensure that lawyers and their clients will be aware of this.
Finally, as I mentioned at the outset, the Bill envisages the possibility of an extension of the framework, a point that I had also covered. But specifically, Mr Louis Ng asked how the framework will be flexible in catering to different categories of disputes. I think Mr Pillai asked how and what are the considerations we have as we consider the extensions of this framework to other types of cases.
Sir, the overarching CFA framework has been designed with the flexibility to enable the framework to be expanded incrementally, step-by-step, after we study and we take into account views by stakeholders.
The main tenets of the CFA framework will be set out and had been set out in the Bill, supplemented by safeguards to be prescribed under subsidiary legislation. The categories of proceedings permitted by the CFA framework will also be set out in the subsidiary legislation. And we took this approach as we anticipated that the profile of litigants would be different for different categories of proceedings and different types of cases. And hence, differentiated and targeted safeguards will be required. There will be flexibility to appropriately adjust the safeguards, as we continue to monitor and refine the framework.
To Mr Murali Pillai's point about the principal considerations, and whether the same level of public consultation will be undertaken, the answer is yes, there will be. The difference in terms of where we are now today on the current framework and where we may expand it to, for lawyers, obviously, when you deal with and compete on the international fora with other foreign lawyers, we want to put our lawyers on the same footing. That may not apply in the context of domestic proceedings.
For domestic proceedings, the main consideration now would be whether we can allow this so that there will be an enhancement to access to justice. Those are the principal considerations. There may be more as we consult but these are the driving considerations. And we will consult with key stakeholders as we look at the landscape and determine whether it would be appropriate to extend this framework to also other types of cases, to promote access to justice. In doing so, we will study also the profile of the likely litigants who will avail themselves of any such expansion and determine in those cases whether some additional form of protection might be necessary for the framework. And if so, we will also prescribe them.
Finally, let me address Mr Thomas' observations on After-the-Event Insurance and its correlation to CFAs, particularly in other jurisdictions. Let me thank Mr Thomas for his views and interest on the subject.
My Ministry is aware of the developments outlined by Mr Thomas and we will review these developments as part of a holistic study of the litigation funding landscape. I would add that After-the-Event insurance is not peculiar and not relevant only to CFAs. They are relevant across the board and generally, supplement and support the litigation funding landscape. So, we will study the After-the-Event insurance in that context and look at whether or not any moves need to be made on that front.
Sir, I believe I have covered all the queries raised by Members, both general as well as specific. My Ministry, as I have said, will continue to review the reforms proposed in this Bill for future expansion and what other safeguards will be necessary. But we believe that the introduction of a CFA framework in this form has the potential to bring multi-faceted benefits. It provides a further avenue for litigants to pursue meritorious claims and levels the playing field for our lawyers, particularly on the international setting.
It will also signal Singapore's progressiveness and our responsiveness to the needs and realities of the industry and further enhance Singapore's status as a premier, first-class dispute resolution hub. We will, at the same time, continue to monitor the impact of the various reforms, keeping our finger on the pulse of developments and lessons learnt in other jurisdictions and apply them contextually to Singapore.
I assure Members that we will continue to stay responsive and engage in active dialogue amongst all stakeholders as we study the progress of our initial framework and look at the extent to which this might be extended to our proceedings. Sir, with that, I beg to move.
Source: Hansard
